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Megafund could provide much needed boost for UK lifesciences

A £10 billion ‘megafund’ has been proposed by the Mayor of London, Boris Johnson, at a special conference hosted by the Mayor of London’s Office. The fund is one of a number of potential new measures proposed to help make it easier for companies in London and across the UK to develop innovative new medicines.

Although specific details are not yet available, it is envisaged that the fund, consisting of a multibillion pound pool of finance, would be available to emerging lifescience companies. Such funding would help enable London and the UK to compete with the booming biotechnology sector in the US and tackle funding shortages in the industry.

Background

The UK ranks second only to the US when it comes to world-leading lifesciences and medicine research and the London-Oxford-Cambridge ‘golden triangle’ alone is home to universities consistently rated in the world’s top 10 Academic Health Science Centres.

However, UK companies face particular challenges and lag behind the US in accessing finance at certain stages of development, particularly taking promising late-stage research into clinical development, where the costs of drug development can be prohibitive for small- or medium-sized companies.

According to the Mayor of London, Boris Johnson, a new approach to lifesciences investment is needed if London and the rest of the UK is to maximise the health benefit of its world-leading research and development base.

The proposals

At a meeting on Thursday 25 June, held in conjunction with MedCity (a collaboration comprising London’s three Academic Health Science Centres – Imperial College Academic Health Centre, King’s Health Partners and UCL Partners) to promote London as a lifescience centre, Boris Johnson, Mayor of London has outlined plans to create a £10 billion megafund that would facilitate the development of new medicines by lifescience companies in the UK.

The fund, which would consist of a mixture of debt and equity finance, would be invested simultaneously in multiple drugs, each at different stages of development. By pooling various drug development projects in a single investment portfolio in this way, the overall risk for investors is lower, since there is a higher chance of bringing a small number of successful projects to fruition. The returns from these successful projects, likely to be a small percentage of product royalties or licensing revenues, would more than compensate for the failure of the remaining projects, proving an attractive proposition for investors who would not normally invest in biomedical research and drug development.

As an alternative approach to the megafund, better use could be made of the new InnovFin financing and advisory programme set up jointly by the European Commission and the European Investment Bank. InnovFin is expected to provide over £17 billion of new financing for research and innovation across Europe over the next five years and helps to share best practice between innovation and lifescience focused companies. The European Investment Bank already provides backing for some UK universities and companies; financial support is expected to be strengthened once the €315 billion European Fund for Strategic Investment is fully operational.

Comment

The announcement by the Mayor of London will be welcomed by lifescience companies across the UK. Realising the full potential of the UK lifesciences industry appears to be high on the political agenda for the current government and the announcement by the Mayor of London serves as a public acknowledgement that the UK is failing to take full advantage of its world-class science due to a lack of innovative funding models, despite London’s position as a global financial centre. Whether or not the megafund comes to fruition in the manner proposed, the announcement is likely to catalyse further debate around how best to attract the necessary investment to create the next generation of lifesciences companies in the UK.

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